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India has become a generic medicine hub in the past 20 years. But investments in drug innovation in the country do not match up to global standards.

On June 28, the National Pharmaceutical Pricing Authority (NPPA) increased the per unit price of Furoped, a life-saving drug for children with heart ailments, by almost eight times. The price of a 30 ml bottle of the drug will go up from Rs 10 to Rs 78 after the drug regulator’s decision. The hike was precipitated by an emergency. According to NPPA’s estimates, the supplies of Furoped had come down by almost 40 per cent after the drug regulator had imposed a price ceiling on the paediatric drug in November last year, bringing down its price from Rs 100 to Rs 10. This price revision is welcome. But the Furoped case also holds important lessons for drug price regulation, which the NPPA would do well to heed.

In a country with a broken public healthcare system, the importance of making medicines accessible cannot be overstated. However, drug price control measures in India have not always achieved this objective. The ceiling on prices of 74 drugs in 1995, for example, forced many companies to opt out of production of active pharmaceutical ingredients (API) bulk drugs or formulations that give medicines their therapeutic effect. Today China supplies two-thirds of India’s API requirements — including critical antibiotics used to treat tuberculosis. The decision on Furoped, too, according to the NPPA’s own admission, did not account for “market realities”. As a report in this paper highlighted, the regulation led the sole manufacturer of the paediatric drug in the country to withdraw supplies, alleging that the new price did not cover production costs. While the veracity of this allegation must be investigated, it’s also important that the country’s drug pricing policy is alive to the risk of medicines being pulled away from the market, especially in a situation where the producer has a near monopoly.

India has become a generic medicine hub in the past 20 years. But investments in drug innovation in the country do not match up to global standards. The country’s pharma industry spends less than 10 per cent of its sales revenue on research. Their multinational counterparts, in contrast, pour more than 20 per cent of their earnings into developing new drugs. The Niti Aayog’s Three Year Agenda Document, released last year, blamed the current drug price control framework for this shortcoming. The think tank’s suggestion that the prices of several drugs be de-regulated should be debated. There is also a need for an informed debate on transparent pricing by pharma companies. But the starting point of this exercise should be the premise that simplistic solutions like drastic price reductions do not increase access to medicines.